Like many other central banks in the world, Nepal Rastra Bank has also taken a step towards introducing digital currency. It is mentioned in the public monetary policy on Friday that a feasibility study of Central Bank Digital Currency (CBDC) will be conducted in Nepal as well. With the expansion of cryptocurrency accelerating in the world, many central banks are preparing to issue digital currency themselves to protect the economy from the risks posed by it. Former Finance Secretary Rameshwar Khanal says that it is important for the central bank to start a feasibility study of digital currency in Nepal.
Recently, cryptocurrencies like Bitcoin and Etherium have been discussed worldwide. However, central bank electronic currencies (CBDCs) are rarely discussed. “However, digital currencies issued by central banks as an alternative to physical currencies are coming to market much faster than we thought,” said Emily Parker, managing director of the cryptocurrency portal Coin Desk.
Some may think that cryptocurrency and digital currency issued by the central bank are the same, but they are different. CBDCs are intangible currencies issued by the central bank under its regulation. Such currencies are in fact intangibles of the physical currency currently being issued by the central bank, which is stored and traded through digital cocaine. Cryptocurrencies are stored in digital wallets, while government-issued digital currencies will be stored in phones. Cryptocurrency decentralized lasers, called blockchains, can be mined by anyone, while CBDCs are centralized by the state. Central banks around the world are studying and using digital currency, especially as the growing popularity of cryptocurrencies poses a challenge to the monetary system beyond the control of the state.
According to the think tank Atlantic Council, more than 83 countries around the world are currently researching the use of digital currencies, accounting for 90 percent of the world’s gross domestic product. Of these, central banks in five countries have already started issuing such currency. The Bahamas was the first to use such a digital currency. Similarly, Saint Lucia, Grenada, Saint Kitts and Nevis and Antigua and Bermuda have also introduced digital currencies.
China leads the race. He is giving away digital yuan to foreigners visiting China for the upcoming Winter Olympic Games. The four largest central banks in the world are the US Federal Reserve, the European Central Bank, the Bank of Japan and the Bank of England. The Atlantic Council says 14 major economies, including South Korea and Sweden, are piloting the government’s digital currency. Neighboring India has also drafted a law in this regard and submitted it to the parliament.
Governments around the world are trying to introduce digital currency for a variety of reasons. The International Monetary Fund (IMF) says states are paying close attention to digital currencies, especially as they are much cheaper than physical currencies. Similarly, the IMF claims that such currencies promote financial inclusion by reaching out to people who do not have access to banks. Because such currencies are available on the phone.
Regarding the move of governments around the world towards digital currency, former Finance Secretary Rameshwar Khanal said that it is positive that Nepal Rastra Bank has started preparations for its feasibility study through monetary policy. “China and the United States in particular are leading the way in the issuance of digital currency. China is trying to transact five billion US dollars in digital yuan,” he said. The fund can be reduced to zero, ”he said, adding that digital wallets can now be used for digital currency. “All wallet transactions can be routed from the central bank,” he said. He also said that the use of digital currency would be important in controlling corruption. He also said that it will help in tax compliance and increase collection.
However, even if the central bank issues and regulates, the circulation of such currencies is not without risk. The Atlantic Council estimates that if citizens start buying digital currency by selling large amounts of physical currency at once, there could be a long line of bankers. Similarly, the theft of cryptocurrencies including Bitcoin, which is still considered to be very safe, is becoming public, said Khanal.
Experts have speculated that the digital currency issued by central banks could end the current US dollar empire around the world. With the introduction of the government’s digital currency, businesses between countries will no longer need Americans, nor they will need a financial information messaging system like Swift.
It is analyzed that it is lagging behind other big countries. However, as central banks issue digital versions of their own currencies, the exchange between them will require another international currency, the digital US dollar, said Berry Eichengrin, a professor at Columbia University in Berkeley.